Buying a house for the second time comes with a unique mix of challenges and opportunities. Some challenges, such as financial crunch and high current Home Loan interest rates, impact all buyers equally. However, second-time buyers have an upper edge over others. There is a lot of advice available for first-time homebuyers, but second-time homebuyers often find themselves perplexed in the process. After all, they have experienced house hunters with confidence and sharper eye to make decisions quickly.
Here, we will discuss a few challenges that second-timers face and know how to overcome them.
Challenge #1: Saving up for the Down Payment
First, let’s acknowledge that saving money for the down payment is challenging for first-time homebuyers. But it is more difficult for second-time homebuyers, as they have already invested a large part of their savings in the first home. Moreover, they’re in the second stage of their life when it is more complicated to manage finances.
What do such people do? The most obvious way to overcome this challenge is to budget. Budgeting gives a strong understanding of an individual’s cash inflow and outflow.
Open recurring deposit accounts for regular savings and save from income, bonuses, tax refunds, hereditary gifts, etc.
Challenge #2: Managing Two Mortgages
Paying two Home Loan EMIs each month is a distant possibility most individuals cannot handle. If the second-time homebuyer is already managing a Home Loan on the first home, they may find it challenging to adjust second Home Loan EMIs into their monthly budget.
Read a similar blog: Top Reasons Why Using a Home Loan EMI Calculator is a Must in 2022
How can a second-time homebuyer avoid such a scenario? The best way to guarantee convenient repayment is to sell off the first home or close its loan account. If that’s not a feasible option, find ways to boost the emergency savings and use them to handle two mortgages. The more savings are there, the better equipped a person is to get the right offer.
Challenge #3: Qualifying for a Second Home Loan
A second-time homebuyer need to prove a sound financial condition to get approved for a second Home Loan. It means – a decent credit score, a steady income source, and minimal outstanding debt. Luckily, here are a few ways to increase loan eligibility:
- Paying all bills on time
- Paying off all credit card bills
- Maintaining detailed records of all income deposits, especially the additional income sources.
- Not taking unnecessary debt
- Retaining old credit card accounts
Since most lending institutions are sceptical about approving second Home Loans, a lower DTI ratio may attract better loan terms. The loan seeker’s debt-to-income ratio compares total financial obligations to all monthly income sources.
Challenge #4: Selling the Current Home
People who cannot manage two Home Loan EMIs at a time might consider selling their current home before buying a second home. But if the sale and purchase do not happen within a short period, they may be stuck in two mortgages.
Upon selling the first house, you need to make an alternative housing arrangement for the time being. That adds extra cost to your finances and requires unnecessary moves between the transactions.
Making the first home’s sale contingent upon the next home’s closing. So the good idea is to manage the timing.
Challenge #5: Managing an Expedited Move
Moving house is a stressful situation many people want to avoid. They are challenging, disruptive, and hectic times that require a family to start their life afresh at a new location. The solution is to do the preparations early, including decluttering the house, tossing out things of no use, and selling or donating items in good condition.
Despite the challenges that most second-time homebuyers face, there are also some advantages they have over first-timers. Since they have already handled everything before, their experience will guide them around mistakes, give them the confidence to make better decisions, and provide a perspective to manage emotions during the process. If buying a second home is not feasible for the time being, take a House Renovation Loan to adjust the current home according to your family’s needs.
Regarding finances, opt for a housing finance company that offers second Home Loans at competitive interest rates. Research the market and know the current Home Loan interest rates to get the best loan offer according to your needs.